Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.

IPG Photonics Heats Up With Record-Breaking Growth

The laser maker gave investors powerful earnings and sales growth to close out 2014.

Lasers have become dramatically more important in recent years, as their use in numerous industrial applications ranging from 3D printing to metal cutting and other materials processing has become more widespread. Laser maker IPG Photonics (NASDAQ:IPGP) has sought to take advantage of these favorable conditions, and coming into Friday morning's fourth-quarter financial report, the company's shareholders had set the bar fairly high in their expectations for its results. IPG Photonics had no trouble vaulting over those high expectations, though, delivering another record quarter of strong top-line and bottom-line growth. Let's look more closely at how IPG Photonics did during the quarter and whether it can keep up its laser-quick growth pace in 2015.

Laser growth faster than the speed of lightIPG Photonics' headline numbers show the extent to which the company has surpassed many of its investors' more ambitious targets. Revenue soared 25% during the quarter to $207.4 million, beating the $204.5 million consensus among those following the stock. Net income climbed by an even more impressive 54%, sending earnings up to $1.07 per share, which compared favorably to the $1.04 per share investors expected.

The company scored major successes in nearly all of its focus areas. Sales of its high-powered lasers jumped 32%, with IPG Photonics citing strength in the North American auto industry and greater market share in metal processing applications. Medium-powered laser sales climbed by 58%, while its new low-cost pulsed laser products helped that segment pick up 16% higher revenue. Quasi-continuous wave laser sales rounded out the increases with a 23% gain in revenue, as IPG Photonics touted higher acceptance of all of its product lines.

Source: IPG Photonics.

From a broader perspective, IPG Photonics has set itself up well for the future. Backlogs of $321 million were up 21% over the course of the year, and the company's book-to-bill ratio was greater than one for the fourth quarter.

CEO Valentin Gapontsev expressed satisfaction with the results. "We continued to expand our breadth of applications, made great strides in penetrating cutting OEMs, and improved our competitive position in the automotive market," Gapontsev said in a press release, and "the growth we anticipated in metal-based 3D printing at the beginning of the year materialized."

Can IPG Photonics keep powering up?IPG Photonics also gave encouraging guidance for the immediate future, setting even higher expectations for the first quarter of 2015 than investors had anticipated. Revenue guidance of $195 million to $205 million for the quarter is toward the high end of the $195.8 million consensus projection among those following the stock, and earnings of $0.92 to $1.02 per share give IPG Photonics more upside than downside from the current estimate of $0.93 per share.

Precision cutting is a key to the company's success. Source: IPG Photonics.

Gapontsev set out ambitious goals for the coming year. "We enter 2015 with a strong backlog," he said, "and remain focused on gaining further share in our established materials-processing applications, completing development of and introducing new products which will expand our available market, and applying our lasers in large-scale and novel applications beyond our core applications in metal processing."

Investors reacted favorably to the report, sending the stock up more than 4% in the first hour of pre-market trading following the announcement. Looking forward, the main driver of IPG Photonics' growth appears to be the cyclical strength in the manufacturing industry; so as long the industry can sustain its activity levels, the company's laser sales should continue to rise. Indeed, if the rest of the sluggish global economy picks up to the extent that the U.S. economy has lately, IPG Photonics could see even more demand that sends its share price even higher.

Author

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.
Follow @DanCaplinger